The public purse is losing up to £25 billion a year - or £1,000 for every working person - because of tax avoidance by companies and by the wealthy, according to a report by the TUC. The union organisation says that the top 50 companies are paying only 22.5 per cent in effective corporation taxation as opposed to the 30 per cent headline rate. Its analysis, carried out by Richard Murphy, an accountant and tax specialist, has found that companies are deferring an increasing amount of tax.
It estimates that if this and other corporate tax were recovered immediately, there would be a benefit of £12 billion to the Exchequer. The report looked into seven years of accounts from the top 50 companies and found that total deferred tax had increased from £8.7 billion in 2000 to £46.7 billion in 2006.
From Revenue & Customs information, the TUC believes that tax avoidance by wealthy individuals, through non-domicile status and other measures, means the loss of another £13 billion. Of the money lost from the super-rich, about £3.8 billion disappears when transactions are moved out of the UK and £3.2 billion goes when earned income is turned into investment income, which is taxed more favourably.
Although none of the practices is illegal, the TUC is using the study to campaign for a clampdown on tax planning and avoidance to improve public finances. It wants a minimum rate of tax to be paid by everyone earning more than £100,000 a year. The TUC also wants the non-domicile tax allowance to be abolished and seeks a moratorium on job cuts in the Revenue to ensure sufficient resources for collecting tax.
Brendan Barber, the General Secretary of the TUC, said: “It’s time for a new campaign for a fair tax system, a campaign that can unite the vast majority of the population who do play by the rules and have nothing to fear from our proposals.”
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However, Ian McCafferty, the chief economic adviser of the CBI, said: “Businesses paid £130 billion in tax last year and have seen this bill rise sharply since 2003 to help pay for public services. Legitimate tax planning - undertaken by companies that operate globally - should not be confused with so-called tax avoidance.”